SPX Technologies, Inc. (SPXC) is a diversified global supplier of highly specialized, engineered solutions serving a wide range of industrial markets. With a rich history dating back to the 1890s, the company has evolved over the decades, leveraging its expertise to consistently deliver innovative products and services that address the critical needs of its customers.
Business Overview SPX Technologies was founded in 1912 as the Standard Piping Company, initially focused on providing piping systems and related services. In the early years, the company manufactured various industrial products and components. A significant milestone in SPX's history came in the 1970s when it made its first major acquisition, purchasing Marley Cooling Tower Co. This acquisition established SPX as a leading provider of cooling solutions for power generation and industrial applications, marking the beginning of the company's shift towards more specialized, engineered products and solutions.
The 1990s and 2000s saw SPX continue its growth trajectory through strategic acquisitions. Notable purchases included Boliden Contech in 1998 and Eclipse, Inc. in 2001, which expanded the company's offerings in the HVAC and industrial markets. These acquisitions played a crucial role in transforming SPX into a more focused industrial technology company.
In the late 2000s and early 2010s, SPX faced significant challenges related to its involvement in two large power projects in South Africa - the Kusile and Medupi projects. These projects resulted in delays, cost overruns, and disputes with the prime contractor, ultimately leading to SPX winding down its DBT Technologies subsidiary in 2021 after completing the projects.
Despite these challenges, SPX continued to evolve and strengthen its portfolio of businesses. In the 2020s, the company made several strategic acquisitions to expand its capabilities in the HVAC market. These included the acquisition of TAMCO and ASPEQ Heating Group, both in 2023, which have further enhanced SPX's position in the HVAC sector.
Today, SPX Technologies operates through two reportable segments: HVAC and Detection & Measurement. The HVAC segment engineers, designs, manufactures, installs, and services package and process cooling products and engineered air movement solutions for industrial, commercial, data center, and power generation markets, as well as boilers and electrical heating and ventilation products for the residential and commercial markets. The Detection & Measurement segment engineers, designs, manufactures, services, and installs a range of products catering to underground infrastructure, transportation, and communication needs.
SPX Technologies is a global supplier of highly specialized, engineered solutions with operations in 15 countries and sales in over 100 countries. The company serves a global customer base in North America, Europe, Asia, and Africa through various distribution channels, including direct to customers, independent manufacturing representatives, third-party distributors, and retailers.
Financial Performance and Ratios As of the latest reported quarter (Q3 2024), SPX Technologies generated revenue of $483.7 million, an increase of 7.8% compared to the same period in the prior year. The company's adjusted earnings per share (EPS) for the quarter stood at $1.39, representing a 31% year-over-year growth.
Financials In terms of financial ratios, SPX Technologies maintains a strong financial position. The company's return on equity (ROE) for the trailing twelve-month period was 13.8%, demonstrating the effective utilization of shareholder capital.
For the most recent fiscal year (2023), SPX Technologies reported revenue of $1.74 billion, net income of $89.9 million, operating cash flow of $208.5 million, and free cash flow of $184.6 million.
In the most recent quarter (Q3 2024), the company reported revenue of $483.7 million, net income of $50.2 million, operating cash flow of $78.4 million, and free cash flow of $70.5 million. The 7.8% year-over-year revenue increase was driven by 15.9% growth in the HVAC segment, partially offset by a 7.0% decline in the Detection and Measurement segment.
Liquidity SPX Technologies maintains a strong liquidity position, with a current ratio of 1.85 and a quick ratio of 1.19 as of the end of Q3 2024. The company's debt-to-equity ratio is 0.53, indicating a balanced capital structure. As of Q3 2024, SPX Technologies held $124.8 million in cash. The company amended its credit agreement in Q3 2024 to increase the aggregate revolving credit commitments from $500 million to $1 billion, further enhancing its financial flexibility.
Operational Highlights and Outlook During the third quarter of 2024, SPX Technologies continued to execute on its key strategic initiatives, including sustainability and operational efficiency efforts. The company reported a 30% reduction in carbon intensity, well ahead of its original targets, and introduced several new climate-conscious solutions that help customers reduce power usage, emissions, and water consumption.
Additionally, the company made progress in its ongoing capacity expansion and throughput improvement initiatives, particularly in its HVAC segment. These investments have enabled the company to meet the strong demand for its cooling products, which have seen continued strength across various end markets, including data centers, healthcare, and institutional facilities.
Looking ahead, SPX Technologies' management has maintained its full-year guidance for 2024, targeting adjusted EBITDA growth of approximately 35% and adjusted EPS growth of 28% compared to the previous year. The company has narrowed its HVAC revenue guidance to $1.365 billion to $1.385 billion, reflecting year-over-year growth of 22.5% at the midpoint. The HVAC segment margin guidance has been slightly narrowed while maintaining the midpoint of 23.5%, representing a 260 basis point increase year-over-year.
For the Detection & Measurement segment, SPX Technologies has increased its margin guidance to a range of 21.25% to 22%, raising the midpoint to approximately 21.6%. This represents a year-over-year increase of approximately 240 basis points, compared with a previously guided increase of 210 basis points.
The company's robust order backlog and healthy end-market trends suggest a favorable outlook for the remainder of 2024 and into 2025. The HVAC segment had a backlog of $437.70 million as of September 28, 2024, up from $338.20 million as of September 30, 2023, including $136.40 million associated with the Ingénia acquisition. The Detection and Measurement segment had a backlog of $193.50 million as of September 28, 2024, down from $233.60 million as of September 30, 2023.
Segment Performance HVAC Segment: For the three months ended September 28, 2024, the HVAC segment's revenues were $335.30 million, up 15.9% compared to the prior year period. The increase was primarily due to organic revenue growth and inorganic revenue growth resulting from the Ingénia acquisition. The segment's income was $80.00 million, up 37.2% compared to the prior year period, driven by revenue growth, associated operating leverage, and the impact of continuous improvement initiatives.
Detection and Measurement Segment: For the same period, the Detection and Measurement segment's revenues were $148.40 million, down 7.0% compared to the prior year period. The decrease was primarily driven by lower large project volume within the communication technologies business. The segment's income was $33.80 million, up 1.5% compared to the prior year period, due to increased volume and a more favorable project mix within the transportation and aids to navigation businesses, as well as the impact of continuous improvement initiatives.
Risks and Challenges As with any industrial conglomerate, SPX Technologies faces certain risks and challenges that investors should be aware of. These include exposure to economic cycles and fluctuations in end-market demand, the potential for supply chain disruptions, and the need to effectively integrate and capitalize on its acquired businesses. Additionally, the company operates in a highly competitive landscape, requiring continuous innovation and cost management to maintain its competitive edge.
Conclusion SPX Technologies' diversified portfolio, focus on sustainability, and operational excellence have positioned the company as a leading provider of specialized engineered solutions across various industrial segments. With a strong financial profile, a promising outlook, and a proven track record of navigating market challenges, SPX Technologies appears well-poised to continue delivering value for its shareholders. The company's maintained guidance and strong performance in the HVAC segment, coupled with strategic improvements in the Detection & Measurement segment, underscore its resilience and growth potential in the industrial technology sector.